Why “Sell in May and Go Away” Statistics Reveal the Hidden Psychology of Seasonal Investing
May 23, 2025
Imagine a seasoned gardener eyeing the calendar, convinced that the earth’s rhythm dictates their every move. Now, picture the investor who, come spring, contemplates cashing out—driven not by analysis, but by the folklore of “sell in May and go away.” At first glance, the two seem worlds apart, yet centuries-old beliefs about cycles, risk, and rest shape both. Here’s the twist: while most accept these seasonal rhythms as gospel, data often tells a different story. The most successful gardeners—and investors—use tradition as a starting point, not a finish line. What if the true edge comes not from following the crowd, but from understanding the psychological machinery behind these rituals? “Sell in May and go away statistics” aren’t just numbers—they’re a window into how stories, biases, and herd mentality drive markets as much as fundamentals.
The Psychological Connection: How Seasonal Bias Shapes Investor Behaviour
Anchoring and the Power of Market Narratives
One of the most insidious psychological forces in both gardening and investing is anchoring: our tendency to rely heavily on the first piece of information we hear, be it the planting season or an oft-repeated market adage. The “sell in May and go away” mantra is a textbook anchor. Investors, like gardeners focusing on the “right” planting date, often ignore contradictory data, believing that summer months are inherently riskier. Behavioural finance experts like Daniel Kahneman have long warned about the dangers of anchoring. Research from the Financial Analysts Journal shows that, while the US stock market does have some seasonal tendencies, the impact is far less predictable than folklore suggests. By blindly following these narratives, investors risk missing out on potential gains or, worse, selling into artificial lulls created by their own collective behaviour.
Herd Mentality and Self-Fulfilling Prophecies
Markets, like gardens, are shaped by crowd behaviour. When enough people act on the belief that stocks will underperform from May to October, their collective selling can actually cause the very dip they fear. This is the herd mentality at work—a phenomenon documented in everything from tulip mania to the 2008 financial crisis. Legendary investor Howard Marks cautions that “the riskiest thing in the world is the belief there’s no risk.” When investors “go away” en masse, they can create the very volatility they sought to avoid. The same happens in horticulture: if everyone plants at the same time, the soil is depleted, pests thrive, and yields suffer. The lesson? Herds rarely lead to outperformance.
Seasonal Affective Bias and Emotional Decision-Making
Our moods are not immune to the seasons. Studies in behavioural science reveal that seasonal affective bias—the subtle influence of weather and daylight on mood—can affect financial decisions. A gloomy summer may sap risk appetite, just as a bright autumn can prompt irrational exuberance. In one notable study, US stock market returns were found to be marginally lower during the summer, but the variance was far less than folklore implies. This psychological quirk is mirrored in the garden, where a rainy spring can prompt overzealous planting, only to be followed by a drought. The wise know to temper their actions with data, not just emotion.
Contrarian Wisdom: Seeking Edge in Uncertainty
Perhaps the greatest psychological parallel is the contrarian mindset. Gardeners who try new planting schedules—testing tradition against evidence—sometimes reap the greatest rewards. Similarly, investors who question “sell in May and go away statistics” and remain disciplined can uncover opportunities missed by the crowd. Warren Buffett’s maxim, “be fearful when others are greedy and greedy when others are fearful,” captures this ethos. The best results often belong to those comfortable with discomfort, willing to endure short-term doubt for long-term gain.
Practical Applications: Turning Seasonal Bias into Strategic Advantage
1. Recognise Your Own Anchors and Herd Instincts
Start by identifying the market adages and seasonal “rules” that shape your thinking. Ask yourself: Is this a data-driven belief or an unexamined habit? Track your investment decisions in a journal and note what triggers your moves—news, folklore, or genuine analysis.
2. Apply Adaptive Wisdom from Other Domains
Borrow the gardener’s discipline: experiment, measure, adapt. Rather than selling in May by default, analyse your portfolio’s performance across different months and market conditions. Use data-driven tools, not just tradition, to guide your strategy. Implement stop-losses or consider partial position adjustments, rather than wholesale exits.
3. Build Resilience Through Contrarian Thinking
Develop a mental framework that values evidence over emotion. When you feel the urge to “go away” because everyone else is, pause. Ask: what if the real opportunity is in staying put, or even buying when others are selling? Study US stock market cases where off-season investing led to outsized returns, building your confidence to act independently.
Case Study: The Investor Who Stayed
During the summer of 2010, while many followed the “sell in May” mantra, an individual investor reviewed the S&P 500’s historical returns and found that, despite increased volatility, there were significant rebound rallies. Choosing to hold and even add to positions, they capitalised on a late-summer rally, outperforming peers who had exited. The lesson: sometimes, the courage to defy the crowd, grounded in data, not bravado, pays the greatest dividends.
Key Takeaways
- Challenge market folklore—don’t accept “rules” without evidence.
- Identify and manage your own psychological triggers.
- Leverage adaptive thinking from other disciplines.
- Sometimes, the boldest move is to stay when others leave.
Questions to Consider
- Which market narratives have you accepted without scrutiny?
- How do you respond to crowd movements—by following, or by questioning?
- Where could you apply contrarian thinking for future gains?
Conclusion: Beyond the Calendar—The Investor’s True Advantage
The real lesson of “sell in May and go away statistics” isn’t in the numbers—it’s in the stories we tell ourselves. Just as the best gardeners thrive when they adapt to their environment rather than blindly follow tradition, the wisest investors seize an edge by understanding—and sometimes resisting—the pull of seasonal bias. Success lies not in the calendar, but in the clarity of your own thinking. When you learn to recognise your psychological patterns, you gain the freedom to act with intention, not compulsion. The result? An investing mindset that endures, no matter what the season.
